Politico Pro Tax: Taking a Pause?
T-MINUS ONE DAY! Grab those winter coats out of storage, because there’s going to be a hot budget reconciliation mark-up at the House Ways and Means Committee’s Longworth hearing room in just over one day.
Now, it doesn’t sound like there will be much in the way of tax action these next couple of days, as Pro Tax’s Brian Faler noted — and we don’t really know yet when the wide range of Democrats’ potential tax hikes (and many of their tax cuts) will take center stage.
But don’t worry: There’s still lots of chatter about those tax proposals, as the House, Senate and White House seek to iron out their differences. One big case in point: The Biden administration’s plan to put a lot more teeth into the international tax system for businesses that Republicans put into place in the 2017 tax law.
About four dozen House Democrats wrote to Ways and Means Chair Richard Neal (D-Mass.) to ask him to stay loyal to those proposals, as your Morning Tax author noted.
It’s hard not to view that message in tandem with a separate letter, sent last month by a different group of House Democrats, that argued that the administration’s ideas went too far.
But beyond questions about how high to set the GILTI rate and what to do about QBAI, one of the undercurrents of Tuesday’s letter — organized by the second-most senior Democrat on Ways and Means, Rep. Lloyd Doggett of Texas — is the concern that Democrats might end up delaying the implementation of any international changes.
You can see the logic to that idea: Any U.S. changes to its international system are entwined with the OECD framework — and, at best, it will still be quite a while before other countries adopt any of the changes agreed to in a global tax deal. So why jump first, and won’t that hurt American companies?
The Democrats on Tuesday’s letter don’t think so: “While the specifics of legislation to be adopted by other countries is not yet known, we do know that when America leads, we can significantly influence what others do to end the race to the bottom,” they wrote.
The idea of a delay in international changes is certainly making the rounds on K Street, which is one of the fears of Doggett and his co-signers. But there are a fair number of questions about how such an idea would work.
How long of a delay, for instance? Plus, pushing back the implementation would mean losing at least some revenue, but it’s tough to know how much until Democrats coalesce around the changes they want to make.